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How Heinemann Is Moving the Dial on Duty-Free Beauty and Sustainability

May 17, 2022
May 17, 2022
Heinemann

Gebr. Heinemann is a global travel retailer that knows a thing or two about beauty. The category is a big focus, and it accounted for one-third of the company’s global sales of €2.1 billion ($2.2 billion at today’s rates) in 2021.

Those recently announced numbers equate to beauty sales of roughly $726 million last year, though in pre-pandemic 2019 they were nearer €1.6 billion. 

Almost a year ago, the company launched a store at Frankfurt Airport that pulled together ideas to appeal to various demographics, among them the LookLab concept, developed in-house to target younger travelers. The Frankfurt launch—during the pandemic—exemplified how Heinemann has used novel ideas, including sustainability, in its approach to beauty—and at its annual results conference at the end of April, it expanded a little more on this.

Before getting to that, it is worth mentioning that Heinemann managed to turn a profit in 2021—a rarity in the world of travel retail. It did so thanks to deep cost cutting, rent reductions, and government bailouts. 

Heinemann’s group turnover of €2.1 billion was less than half (44%) of the €4.8 billion it generated in pre-pandemic 2019. The revenue decline closely tracks the numbers of air passengers—in other words, potential customers. They were down to 48% of 2019, when 9.2 billion travelers took to the air. In 2022, the Hamburg-based company forecasts turnover to reach 75% of 2019 levels.  

Beauty holds its own, fragrances in particular

Through the pandemic, beauty has maintained its share of total sales at about 33%, though that could go up. Chief Commercial Officer Dirk Schneider said, “Our ranges should be a source of inspiration and innovation. Together with many of our suppliers, we see the opportunity to grow very strongly in the future.”

That opportunity is not so easy to pinpoint in fluctuating times. During the pandemic, travel shopping habits changed. Though far fewer people were around to shop, those who did spent more per head, and there was a shift away from skincare and cosmetics to perfumes. That is probably the result of almost no international Chinese travelers (who tend to buy skincare) and a degree of COVID caution around product testing/sampling. 

Within beauty, Schneider said: “Fragrances were the core driver for growth accounting for about 80% of our retail beauty turnover. This was due to the changed passenger profile, low share of Asians, and also because niche fragrances are now in high demand.” 

Such a shift, even if temporary, needed a response. Last year, Heinemann reviewed its product range with a view to what Schneider called a “sustainable and spectacular” assortment. He explained, “We upgraded with exclusive, rare, trendy and sustainable products.” Many of those newcomers are in the aged spirits segment, but beauty is also a big focus. 

The rise of niche scents 

Schneider said, “Niche brands and certain others are of high interest to travelers, for example, Creed (majority owned by investment firm BlackRock), Penhaligon’s (owned by Puig), and Pixi Beauty. We will give more room to innovative brands and category concepts.”

At Istanbul Airport, a location where the sales rebound has been among the best for Heinemann (back to around 70% of pre-crisis levels), scents were in the spotlight. “Niche perfumes in particular proved to be very popular,” said Britta Hoffmann, Heinemann’s Director Purchasing for Perfume & Cosmetics. 

“These included unique fragrances from Creed, Kilian, Maison Francis Kurkdjian, Penhaligon’s, and Xerjoff, that are not produced for the mass market and only available from select retailers. This category will feature more prominently in Istanbul in the future and will be steadily expanded.” 

Climate-positive supply chain by 2032

Incorporating sustainability has also been a goal for CEO Max Heinemann and, by default, is part of the company’s new human-centric mission statement. The CEO commented, “We are a family business—more human, more passionate, more reliable, more accessible, and faster than others. From survival mode in 2020, in 2021 we looked at our strategic role in travel retail and laid out the foundations for our future, with sustainability a key priority.” 

In the final quarter of 2021, Heinemann tested an idea called “Future Friendly” with the slogan “Great for You. Better for the Planet.” at its stores in Berlin, Hamburg, and Frankfurt. Schneider said, “It is our first rollout of a cross-category concept focusing on sustainable packaging initially.” To be labeled future friendly, the launch campaign required brands to fulfill at least one of the four attributes: be recyclable, already recycled, be refillable, or plastic free. 

Suppliers to Heinemann will likely have to fall in line with the retailer’s demands on sustainable packaging going forward. Schneider noted, “This is the beginning of a longer journey to a large extent; we are doing some pioneering work with our suppliers who have been very supportive. Basically we are setting a new standard for responsible shopping.”  

Moving on from packaging, to materials, ingredients, and more, Heinemann expects to add extra standards to its “Future Friendly” seal, a project that the company says is a first in travel retailer worldwide. 

By working with its supply partners and reviewing all elements of its wider value chain, Heinemann is pushing hard on its own sustainable development goals. Schneider said: “We aim to have a climate-positive supply chain by 2032, which goes beyond carbon neutrality. We will be carbon neutral (Scope 1 and 2) by 2024 for our own supply chain.”

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